foreign earned income

[rebekah1]

So, I've been here half a year, and had been told before that the US wouldn't be taxing me for what I make here- I can file an extension and then, once I qualify for the physical presence test I get the foreign earned income waiver. Now, I know that I wouldn't be able to claim $90,000 which is the top amount for one year, but I thought that it would just be maybe I would be able to claim whatever percent of the year times that amount. Now the tax software people are claiming that I can only exclude the percent of the year times the money I make! And that I have to pay tax on the rest! But I've already paid taxes here! And I am getting nowhere with the IRS, they seem to say the same thing, but all they will tell me is to work it out on paper, and that seems to indicate I am right. Any ideas?

[Plats]

You are right. Form 2555 (or 2555-EZ) is quite clear. Maybe those tax software and IRS people are assuming you worked in the US the rest of the year and that you have to pay tax on that amount. What does the Form 2555 the tax software generates say?

[psprof]

So, I've been here half a year, and had been told before that the US wouldn't be taxing me for what I make here- I can file an extension and then, once I qualify for the physical presence test I get the foreign earned income waiver. Now, I know that I wouldn't be able to claim $90,000 which is the top amount for one year, but I thought that it would just be maybe I would be able to claim whatever percent of the year times that amount. Now the tax software people are claiming that I can only exclude the percent of the year times the money I make! And that I have to pay tax on the rest! But I've already paid taxes here! And I am getting nowhere with the IRS, they seem to say the same thing, but all they will tell me is to work it out on paper, and that seems to indicate I am right. Any ideas?

I cannot understand what you are talking about, but I think it is very simple. In your first year:
1) File an extension until you have enough time here to qualify for the physical presence test.
2) File your tax return at that time, when you qualify.
3) If you spent 6 months in Japan during the tax year (6 months in the next year to qualify), you can only exclude 1/2 of the maximum $92k because you were only in Japan for 6/12 months. This should be clear when you fill out the 2555 form.
4) You must pay tax on anything over the income exclusion or any money you made in the US before you moved to Japan, minus deductions, etc.

Note that if you owe money because you didn't pay enough for the money you made in the US or if you make more than the excluded amount, you could get charged interest. If you think you will owe money, you should try to prepay so that you don't get charged interest.
I think it is simple enough to file by hand and forget the software. I used to do it by hand every year and never had problems.